Analysts at Wells Fargo, point out that retail sales surged in May but they warn that sustaining this pace needs a higher income growth.
“Retail sales surged 0.8 percent in May after an upwardly revised 0.4 percent increase in April. Excluding gasoline stations’ sales, retail sales also increased a strong 0.7 percent.”
“The May retail sales report was very positive for the performance of the U.S. consumer in the second quarter of the year after a disappointing performance during the first quarter. This is clear by looking at the result for control group sales, whose index increased a stronger-than-expected 0.5 percent, while April’s increase was revised up from a 0.4 percent increase to a 0.6 percent increase.”
“The recovery in PCE during the second quarter of the year has been front and center for the past several months in the news and this retail sales report is just a confirmation of a very strong recovery by the U.S. consumer expected during the second quarter of the year. The relatively strong print by automobile sales is, perhaps, the realization by the American consumer that higher interest rates are here to stay and they should move ahead of even higher interest rates in the future.”
“Not all is good news for the U.S. consumer and for the U.S. economy, as we have also seen a slowdown in credit card borrowing, a further decline in the saving rate and much higher gasoline prices. Thus, Americans will need an improvement in income growth in order to continue down this path of growth in retail sales and PCE.”
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